(Oct 29): As the global brokerage industry shifts to zero fees for trading and robots to give advice, one company in Singapore is deciding to buck the trend.
UOB-Kay Hian Holdings has taken on a large group of securities trading representatives, known as remisiers, from a brokerage arm of the country’s largest bank. It’s essentially a bet customers will still pay extra to be hand-held in their trades.
“There is a lot of digitisation but the human touch is still very important,” Esmond Choo, senior executive director at UOB-Kay Hian, said in an interview. People will be willing to pay “a few basis points” for the service, he said.
About 100 remisiers, who are paid on commission and aren’t full-time staff, have moved from DBS Vickers Securities (Singapore), according to Choo. That means UOB-Kay Hian, whose commission income fell 30% in the six months ended June from a year earlier, now has 820 of the representatives in Singapore as well as a large network in other Asian markets, he said.
“DBS’s decision offered a good opportunity to scale up,” Choo said. “It takes a lot of time to build a base of 100 remisiers.”
UOB-Kay Hian’s expansion comes as firms such as Charles Schwab Corp. and Fidelity Investments have eliminated fees on a range of offerings, and as robo-advisors are increasingly used to help clients to construct portfolios at a fraction of the cost of human advisers.
It will take three to five years for the global trend of alternative low-cost and automated products to take hold in Asia, according to Justin Tang, head of Asian research at United First Partners, an investment and advisory group that specializes in special situations. The move by UOB-Kay Hian, however, “will give it new clients and revenue in a relatively short time,” he said.
‘Human Touch’
Asian “societies still have a lot of old folks preferring the human touch,” Tang said. But at the same time, “younger investors will just key in orders on their phones,” he said.
UOB-Kay Hian, which is about 39% owned by United Overseas Bank, is open to hiring more remisiers and acquiring smaller brokers, according to Choo.
Over the years, remisiers have started selling multiple products and services to clients, helping to bring in more assets, he said.
UOB-Kay Hian’s stock has fallen about 30% from a high in February 2013 and trades at less than 0.7 times book value. Net income on a GAAP basis was $74.8 million last year, a decrease of about 20% compared with 2013, according to data compiled by Bloomberg.
“The market has so far not appreciated our model,” Choo said. “The idea is to do as much business as possible” with the remisier network, he said.
